Complaints over the Metropolitan Collieries mine arose last year after the operator's alleged infringements resulted in "significant pollution events at Camp Gully Creek", the NSW Environmental Protection Authority said in a statement on Tuesday.
Last year, locals reported a black sludgy substance floating in Port Hacking River at Royal National Park in Sydney's south.
Locals told the Sydney Morning Herald they spotted the substance flowing through the usually clear water, which they claimed came directly from the mine.
The pollution event remains under investigation by the NSW Environment Protection Authority, however two unrelated penalty notices have since been issued to Metropolitan Collieries, totalling $30,000.
Metropolitan Collieries is expected to have strong environmental practices, and any lapses resulting in environmental pollution will not be tolerated, EPA chief executive Tony Chappel said.
The tightened operating conditions will also require the mine operators to engage in real-time monitoring of water quality, and create a coal discharge monitoring plan with data available to the local community.
"We're requiring the mine to take further immediate action to better protect the national park and I want to thank the entire community for their support and involvement in the review of the licence," Mr Chappel said.
More than 200 members of the community had made submissions informing the licence changes.
"The Royal National Park is one of Sydney's most pristine natural environments and we are requiring the mine to take immediate actions to protect the park," he said.
"Everyone in the community will now have access to real-time water quality data, both down and upstream of Camp Gully Creek, and results from extensive water monitoring including testing for chemicals."
AAP has contacted Metropolitan Collieries for comment.
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